Taiwan seeks to regain its lead in electronics

FOSTERING INNOVATION:：The steady decline of PC sales worldwide is spelling trouble for consumer electronics firms. The reasons are myriad and the solutions, so far, are few

BY Keith Bradsher / NY Times News Service, TAIPEI

Tue, May 14, 2013 - Page 13

Jonney Shih (施崇棠), the chairman of Asustek Computer Inc (華碩), has epitomized the Taiwanese electronics engineer for a generation: A slender figure in rumpled, baggy trousers, he once helped Intel solve heat problems in its Pentium 4 microprocessors.

So it has been a surprise during the last several years to see Shih, now 60, reinvent himself with snug-cut Italian suits, innovative designs for tablet and notebook computers and scathing criticisms of Taiwan’s test-obsessed, engineering-oriented educational system.

“I don’t think the Taiwanese got very good training to drive the mentality of innovation,” he said during an interview at Asustek’s headquarters on the outskirts of Taipei.

Fostering innovation has become a mantra among corporate leaders and government officials alike in Taiwan this year because the nation’s huge consumer electronics industry has run into serious trouble.

“Outside of Asus, all the others are struggling,” said Helen Chiang (江芳韻), a Taiwan electronics specialist at the International Data Corp (IDC) research firm.

One exception to Taiwan’s difficulties is Asustek. Its many new Android-based tablets, including one that it has branded with Google Inc, allowed it to surpass Amazon in the first quarter of this year to become the third-largest player in the global tablet computer market, behind Apple Inc and Samsung Electronics Co, according to IDC.

And some of its designs are downright clever. One new model, the PadFone, lets the user slide a cellphone into the back, turning the tablet into an oversized cellphone. Another tablet, the Transformer, features a detachable keyboard with a wireless connection and a two-sided display panel that can show a movie on one side to entertain children or guests while the other side is a regular computer display for the owner.

Those innovations have helped keep Asustek’s sales growing, up 16 percent in the first quarter from a year ago. That was even as worldwide PC shipments fell 11.2 percent, according to Gartner Inc, another research firm.

However, that Taiwan needs to look to 60-year-olds like Shih for innovation is a concern for government officials. As economic growth has stalled in Taiwan and new factories have shifted to China, young people have become more interested in civil service jobs and academia instead of industry, government and industry officials say.

One worry is that people with new ideas at universities and government laboratories are not commercializing them.

“Our teams think the problem here is those inventors didn’t pursue it, to push their inventions into the market,” National Science Council Minister Cyrus Chu (朱敬一) said. “Youngsters here are afraid to fail — we are not ready to face failure.”

Another big concern for industry and government is that the ability of Taiwan’s electronics business to innovate may be hamstrung by the very quality that has brought the sector so far over the last three decades: obsessive secrecy.

To win contracts to supply the likes of Hewlett-Packard and Dell, Taiwanese companies routinely divide their staffs and dedicate teams to each foreign customer. They even set procedures for making sure that engineers and buyers from different clients do not accidentally meet one another while having lunch at company cafeterias.

That secrecy makes it harder for the Taiwanese industry to learn good ideas quickly from foreign and domestic rivals.

“They keep secrets and don’t duplicate, so the customers are happy to work with them,” said Chan Wen-hsin, a senior industrial technology specialist at the Ministry of Economic Affairs.

Yet another concern for Taiwan lies in a brain drain of mid-career technology experts leaving for China from Taiwan’s universities and government-backed research institutes. Even the vaunted Industrial Technology Research Institute, which gave birth to global semiconductor powerhouses like the Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電) has been losing experienced researchers.

To be sure, Taiwanese companies are now trying to increase the pace of innovation. Also, one lingering cost advantage for Taiwanese companies is that pay for recent college graduates in electronics engineering and computer sciences is low and gradually declining.

Acer says that it plans to double research and development spending as a share of sales this year, by 1.2 to 1.5 percent.

Gregory Bryant, the general manager of Intel’s Asia and Pacific operations, said, “There is a resurgence of innovation and investment in Taiwan.”

Analysts say that Asustek’s innovations may not represent the same kind of big leaps forward as the iPad or iPhone, but may be what other Taiwanese manufacturers need to retain their role in the global consumer electronics industry.